How Kenya is Viewed by Ma­jor Chi­nese In­vestors

Ac­cord­ing to the sur­vey cor­rup­tion is the key bar­rier, with 68 per cent of Chi­nese com­pa­nies la­belling it ‘a very sig­nif­i­cant ob­sta­cle’; crime, theft, dis­or­der, and safety con­cerns are the sec­ond big­gest chal­lenges at 63 per cent, and ob­tain­ing work permi

Diplomat East Africa - - Table of Contents - EDGAR NYANDONG ex­plains

As Africa’s sin­gle largest trad­ing part­ner, fi­nancier of in­fra­struc­ture devel­op­ment, in­vestor in African economies and lender to many coun­tries, China is con­cerned about the busi­ness and in­vest­ment cli­mate in Kenya.

The first ever Kenya-China Busi­ness Per­cep­tion in­dex says the gov­ern­ment needs to in­vest more in en­ergy, im­prove wa­ter sup­ply, ease of ac­cess to land and cut down red tape to at­tract and re­tain for­eign in­vest­ments.

It also says cor­rup­tion, crime and safety are key chal­lenges that face busi­nesses op­er­at­ing in the coun­try and ham­per the pro­duc­tiv­ity and growth of in­vest­ments.

The ob­ser­va­tions were made at the first Kenya-China Busi­ness Per­cep­tion In­dex (BPI) 2014 sur­vey launched in Nairobi last month. It was car­ried out by Sino Africa Cen­tre of Ex­cel­lence (SACE) Foun­da­tion be­tween Fe­bru­ary and June 2014. It sought to un­der­stand the char­ac­ter­is­tics of Kenyan-based Chi­nese en­ter­prises, the prob­lems and ob­sta­cles they face in do­ing busi­ness in the coun­try, and the kind of pol­icy sup­port they need.

The launch brought to­gether

pol­icy mak­ers, lead­ing Chi­nese and Kenyan com­pa­nies which dis­cussed Chi­nese in­vest­ment ac­tiv­i­ties in Africa, and how the re­search can cre­ate a model that would be ben­e­fi­cial to other African coun­tries.

The four main cat­e­gories that were cov­ered in the BPI sur­vey in­cluded the legal en­vi­ron­ment, work­force, op­er­a­tional fa­cil­i­ties and the so­cio-po­lit­i­cal en­vi­ron­ment. A to­tal of 75 Chi­nese en­ti­ties in the coun­try took part in the sur­vey.

As Africa’s sin­gle largest trad­ing part­ner, fi­nancier of in­fra­struc­ture devel­op­ment, in­vestor in African economies and lender to many African coun­tries, China is con­cerned about the busi­ness and in­vest­ment cli­mate its en­ter­prises op­er­ate un­der in Kenya.

“Most Kenyan-based Chi­nese com­pa­nies ex­pe­ri­ence ha­rass­ment from lo­cal gov­ern­ment func­tionar­ies. They are anx­ious about the so­cio-po­lit­i­cal en­vi­ron­ment in the coun­try,” noted Mr Jing­hao Lu, the SACE Foun­da­tion Head of Busi­ness Devel­op­ment.

He noted, “It is im­por­tant to note that safety is­sues, ac­cord­ing to the sur­vey, are also a ma­jor con­cern with many Chi­nese com­pa­nies be­ing sus­cep­ti­ble to theft, rob­bery, van­dal­ism and on-site ar­son com­pared to other com­pa­nies in Kenya.”

The BPI re­port shows that cor­rup­tion is the key bar­rier, with 68 per cent of Chi­nese com­pa­nies sur­veyed la­belling it ‘a very sig­nif­i­cant ob­sta­cle’. Fur­ther, crime, theft and dis­or­der, and safety con­cerns are named the sec­ond big­gest chal­lenge at 63 per cent, with ob­tain­ing work per­mits com­ing in third at 42 per cent.

"...To al­le­vi­ate Chi­nese com­pa­nies’ sit­u­a­tion re­gard­ing ha- rass­ment from lo­cal gov­ern­ment func­tionar­ies, the fol­low­ing pol­icy sup­port can be pro­vided; Chi­nese com­pa­nies’ aware­ness against bribery should be im­proved and de­tailed in­for­ma­tion on busi­ness-re­lated reg­u­la­tions and rules should be also dis­closed and dis­sem­i­nated; more train­ings on Kenyan laws and reg­u­la­tions would help Chi­nese com­pa­nies bet­ter iden­tify their own flaws and wrong­ful ac­cu­sa­tion from gov­ern­ment of­fi­cials; and in­for­mal chan­nels for in­for­ma­tion dis­sem­i­na­tion can also help ad­vise Chi­nese com­pa­nies on proper con­duct in terms of tax, labour ad­min­is­tra­tion, and in­tel­lec­tual prop­erty, etc..." the re­port reads in part.

But Mr David Mugambi of Kenya In­vest­ment Author­ity says that de­spite the re­port per­ceiv­ing Kenya to be cor­rupt, with a list of var­i­ous or­gan­i­sa­tions named, in­vestors should use the Author­ity by re­port­ing any is­sues that af­fect their in­vest­ments. He adds that the Author­ity is aware of the en­ergy, wa­ter and land con­cerns and is lob­by­ing the gov­ern­ment on a pol­icy level for ac­tion.

Some of the in­sti­tu­tions named in the re­port that are said to per­pet­u­ate the above ob­sta­cles in­clude the Kenya Rev­enue Author­ity (KRA), Nairobi City County and the traf­fic po­lice.

The sur­vey is now con­cerned with iden­ti­fy­ing gaps in or­der to cre­ate a model that can be used in other African mar­kets. Ac­cord­ing to Jing­hao, the SACE Foun­da­tion is in the process of look­ing for more funds to con­duct in­dex sur­veys in other African coun­tries.

The sec­ond stage which be­gan in mid-2014 is set to be com­pleted in 2015 with An­gola, Ghana, Nige­ria, Tan­za­nia and South Africa un­der im­me­di­ate fo­cus

The four main cat­e­gories that were cov­ered in the BPI sur­vey in­cluded the legal en­vi­ron­ment, work­force, op­er­a­tional fa­cil­i­ties and the so­cio-po­lit­i­cal en­vi­ron­ment

THE TEAM: SACE Foun­da­tion founder, Mr Isaac Kwaku Fokuo Jr. (3rd right) with the SACE Foun­da­tion team pose for a photo with the KenIn­vest Se­nior In­vest­ment Pro­mo­tion Of­fi­cer, Mr David Mugambi (left) and Mr Ed­win Macharia, a part­ner at Dal­berg Global Devel­op­ment Ad­vi­sors (3rd left) dur­ing the BPI launch

DIS­CUS­SION: Mr Jing­hao Lu, SACE Foun­da­tion Head of Busi­ness Devel­op­ment ad­dress­ing par­tic­i­pants at the BPI launch in Nairobi

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